Monthly Archives: January 2017

Jallikattu is in the news again. Last January, I had written about it in the Mumbai Mirror. I thought it would be in the fitness of things to pull them out and post the two pieces here. Hence this post.

TAMIL TERROR OR TAMIL PRIDE?

It is another example of the interplay between policy, politics and law. Bowing to political pressure around election time in Tamil Nadu, a political system that is inclined to favour a ban on cow slaughter for trading in beef, was happy to favour removal of a ban Jallikattu.

Jallikattu is an ancient, bloody, bull-taming Tamil sport, played during the Pongal festival and involves human beings recovering a packet of prize money tied to the horns of a special breed of bulls that charge down a path. Yet, today, when this column is published, Tamil Nadu will witness another Jallikattu-free Pongal. Hearing a challenge by the Animal Welfare Board and others, the Supreme Court has issued an interim stay on the government’s notification permitting the sport. The court has refused to vacate its stay when a bunch of intervening petitioners from Tamil Nadu sought to have the stay revoked. This is not a final view of the court. It would eventually hear arguments on whether the government was right when it conducts a final hearing in the matter.Jallikattu has remained banned for the past four years. Arguments in favour of revoking the ban range from Tamil pride (“Jallikattu is one such precious heritage that has been preserved over millennia and our duty is to take this forward”) to counter-intuitive economic theories (“If Jallikattu is banned, livestock keepers will be forced to abandon the raising of native livestock, which already stands threatened due to the extensive use of mechanised agriculture. It would be the death knell of native cattle species in Tamil Nadu”).

The court has found that despite the safeguards claimed to have been introduced by the government to enable the sport to be played, it appears that the sport would still violate law preventing cruelty to animals. State governments have been asked to file replies on the issues raised in the petition being heard by the court. Until the petitions are heard, the sport will continue to remain banned.

The argument that introduction of “safeguards” on paper would remove cruelty to the bulls even while protecting heritage follows the famous Indian expectation that virtue can be legislated. Capacity constraints in enforcing law rendering provisions of law meaningless are legendary. Examples abound. We have a fantastic law on domestic violence without investing in infrastructure that is necessary to implement it. We create tribunals to dispense substantive justice without the constraints of formalities involved in courts but we do not create the state capacity to select the men and women who would conduct proceedings in the tribunals. The same is the case with punishments for violating the expectation of virtue. We have the most stringent anti-corruption law in the world—even removing the requirement to actually prove gratification—but corruption is rampant. We introduce death penalty for sexual assault on women, ignoring repeated pleas of women’s rights experts, and assaults continue unabated. On the contrary, the higher punishment increases the risk of victims being killed so that they do not live to tell the tale.

The more evident view is that the government clearly knew that the courts would strike down the removal of the ban. It seems to have consciously simply kicked the can upwards for the courts to protect animals since it was getting too politically emotive to continue the ban. More than the government’s removal of the ban or the court’s reinstatement of the ban, what is to be celebrated is the effective working of the tension between institutions.

The Animal Welfare Board acted autonomously and challenged the government’s revocation of the ban to test its belief that the law was being violated. Maneka Gandhi, an animal rights activist who is also a minister in the government openly expressed her disagreement with the move, provocatively terming the sport as a copy of Spanish bull fighting.

That the claim to pride in Tamil heritage cannot be monopolized too has become underlined. Senior officials of the Animal Welfare Board who challenged the government are Tamil. Senior counsels who fought against the revocation of the ban too were Tamil. For the record, so is this writer.

LAW VS THE JUDGMENT OF SOCIETY

The conflict between social conventions and social change is spreading across the Indian subcontinent. First, sections of societies in two South Indian states had a fracas that stirred sentiments nation-wide – on the issues of women entering the Sabarimalai Temple in Kerala, and the reintroduction of Jallikattu in Tamil Nadu. Then, a similar clash among segments of Pakistani society arose. Lawmakers struggled last week to table and pass stricter laws against child marriage, in the teeth of opposition on traditional and religious grounds.

Even speaking of the two in the same breath may be considered unnecessarily provocative. Last week’s edition of this column, simply articulating what the Supreme Court had done as an interim measure with Jallikattu, met with emotive reactions. An urban non-traditional Tamil was seen as having no sense of the matter at hand, and worse, as having no right to even discuss the issue.

A supporter of a ban on entry of women into the temple may feel that ban on Jallikattu may be right. Equally, an animal-lover supporting a ban on Jallikattu may have “religious” and sentimental opposition to letting women enter unfettered into the temple. One may hate child marriage but support Jallikattu and still oppose female entry into the temple. Given the breadth of polarising subjects, there are exponential combinations.

Recognising the right of a 16-year old to consent to marriage may sound jarring and unconscionable to the same human mind that roots for a 16-year old accused of rape to be executed, castrated or imprisoned for life. For the rapist, a human mind may justify thus: “If fit to commit adult crime, then fit to be treated as an adult criminal.” For the consenting 16-yeard-old, the same human mind may not be able to say: “If fit to conceive a child, then fit to be treated as an adult spouse.”

What a human perceives as unconscionable and unacceptable change in societal norms depends on the person’s own conditioning and politics and the consequent definition of a comfort zone. But if one were to dispassionately look through arguments made by those for and against each of these positions, a common thread will emerge. At the heart of the discourse lies a conflict between one segment of a society pushing for a new normal and another segment unable to accept that no tradition is permanent. Each can find reasons and arguments to support the stance taken.

No law can obtain happy endorsement from every single segment and sub-segment of society. There always has to be a give and take, a delicate balance of competing and conflicting objectives and desires, and a baseline acknowledgement of merit in some element of the contrary view. The mood of society varies with time and with that, the position taken by the laws which society desires to bound by, would vary too.

This is how eventually a society finds its own comfort zone. Dissenters critique the law if it does not suit their politics. And root for bringing about change. At every point in time in the history of any law, there will have been a greater emphasis or underlining of the interests of one segment of society over another. There is no other way that practices like sati or dowry would be banned by the law, and there is no other way that such practices would still be prevalent despite the law. Even as recently as the 1990s, incidences of sati and the construction of “sati temples” were reported, leading to a nationwide furore.

Child marriage, child labour, dowry, or for that matter, the caste system, all lend themselves to arguments for and against. It is amazing how the human mind can find reasons to support an argument for or against a legal intervention – if that intervention could lead to change, change that could be deemed desirable or undesirable, depending on one’s politics.

At the end of the day, all humans yearn to belong to a tribe. Tribal convention and belonging is as human as the desire to find meaning in life. After all, even those seeking to change the existing tribal conventions, constitute their own tribe.

If you can effect and defend the note ban, so can you take these measures

It has been by far the most disruptive structural change in the recent history of Indian economic policy. First, rendering illegal as much as 85 per cent of the floating currency stock, and then, also the currency that was not turned in, have been the government’s two “tough” calls. Much ink has been spilled over whether these were sensible moves and whether the objectives held out as the driving reasons have been met at all.

However, since the mood of the moment is to push for structural changes, no matter how risky they may be to popularity, this is the time to think about the next set of structural changes that could be pushed through. The government has demonstrated its proficiency in handling proposals that could have been fatal to popularity, by bringing to bear a combination of reductionist and simplistic logic and turning adversity into advantage.

More importantly, the appetite for swallowing structural changes that may cause pain has never been higher. Therefore, now is the time to move on some structural changes that are also backed by merit and reason, which should make them easier to achieve. If any of these sounds tough to carry out, remember, it cannot be tougher than demonetisation.

First, the role of our regulators, as currently structured, is crying for change. For example, the Reserve Bank of India as a regulator of banks can be divorced from its role as a central monetary authority. It is the latter that needs complete independence and autonomy; the former needs reform and clarity of thought. There is too much bundling of the regulatory objectives of ensuring good conduct by banks into the role of being a monetary authority, with a lack of clarity on which measure would address which objective.

Likewise, the Securities and Exchange Board of India inextricably interlinks the objective of regulating market conduct with that of prudential regulation. The former requires disciplining errant market players, the latter thinking on how to keep the market financially safe and how to ensure that intermediaries, who hold out promises to society, have the financial capacity to perform with intensity. The structure of the insurance regulator, or for that matter, the pension regulator, needs similar attention.

The very structure of the regulatory architecture needs attention. It is time to separate the functions of regulating players in the financial markets into one regulatory agency that would focus on prudential regulatory requirements. This regulator has to think and breathe issues relating to prudential norms applicable to market participants: what sort of net worth they must have, what capacities they must develop and nurture, what they must do to address risk to their own existence to keep the market safe, and the like. A separate regulatory agency must focus on abusive conduct by players in the market. It would have the task of taking disciplinary action for wrongdoing.

In short, the entire financial sector regulatory framework can be re-engineered and recast to end up with three agencies — the central bank, a prudential regulator and a conduct regulator. This is hardly an original idea — the United Kingdom has this structure. Demonetisation was not some original idea either. If that project can be achieved, so can this one, with far better outcomes.

Second, since our justice delivery system has been debilitated by a variety of state capacity issues, the small man does not get justice. There is too much focus on the speed of justice, with quality seen as being capable of compromise — a bit like not worrying about manuals of medical procedures when handling a large number of victims of disaster or war. Therefore, a Financial Redressal Agency, with its governance manned by representatives of the three regulators, can focus on redressing the grievances of smaller consumers of financial services. Today, a small complainant would be lucky if her letter with a tale of woe manages to get the attention of the governor or the chairman. If not, a computerised sarkari process deals with investor grievances in a robotic manner. A lot of this work is even outsourced by regulators.

Yet, regulators loathe ceding ground in this space, for the ability to call up senior officials of market intermediaries and direct them to address grievances gives them unstructured muscle power over market intermediaries. However, actually formal assured redressal of customer grievances is an activity that needs round-the-clock attention of a dedicated agency that can also build up intelligence of malpractices and abusive conduct detected when handling complaints, and providing that to the conduct regulator to take pre-emptive and curative steps. Focused collection of such intelligence would also expose organisations that adopt standard processes in abusive conduct across sectors. This would be a tough measure to implement, considering that opposition comes from the regulators themselves, but remember, it cannot be tougher than demonetisation.

Finally, in the Union Budget due shortly, the government must have the courage to waive or drastically reduce transaction costs for consumers using electronic payments. If one element of state policy pushes consumers to use electronic platforms and online payment systems, another must not impose a cost. The recent stand-off between banks and fuel stations was only a teaser; it can lead to a far bigger problem. If those providing payment platforms need to be compensated for their service, it would be a fit case for the government to transparently assess how they may be subsidised, if necessary, to keep the customer protected from becoming captive to ridiculous transaction costs. If demonetisation truly provides long-term aid to bring the economy into the banking system, there has to be payback and reward for consumers who “queued up with pride”. There can be no reward more appropriate.

This column was published in the Business Standard in the editions of January 19, 2017 titled Without Contempt

A few legal and regulatory areas fare in 2017 could hold key for larger reform beyond this year

It is that time of the year. A new year is born. Somehow, magically everything seems possible. Yet, the day’s sentiment makes it easy to get despondent about what can indeed be achieved. To quote Bill Gates, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.” Through that prism, what does the new year have in store? This piece will pick a few legal and regulatory areas that would be at the core of change this year.

First, the year may kick off with the appointment of a new chairperson of the securities market regulator. The new incumbent, if there is one, would face several challenges. Even while state policy appears to bring more of the population into financial assets, with financial technology paving the way, financial inclusion, particularly in the securities market, remains elusive. A range of policy measures intended to “protect” the small investor has backfired, with unintended and counterproductive outcomes — examples range from an informal “safety net” to save investors from equity risks killing the equity markets instead, to asking brokers to put away funds when small investors have a business dispute resulting in brokers, who care for their balance sheets steering clear of small investors. The process to participate in our equity markets is overwhelming, and householders who save are easily deterred by the burden of tapping into the securities market, and settle for gold and real estate instead.

There is still talk of the need to remove the age bar for regulatory chairpersons. The argument goes that the Reserve Bank of India’s governor does not face an age cap and yet “young” incumbents are found. But if that is an argument to keep the office warm for retired bureaucrats, it would be the tyranny of age in an age-discriminating society scoring a relentless march in one more sphere. Only last week, the Supreme Court directed an age cap for incumbents in the Board of Control for Cricket in India. What is good for the sports regulator is good for regulators of market activity. Changing the age limit would need an amendment of law. Only a presidential ordinance can pull this off, but appetite for an ordinance on this subject would be weak. A Constitution bench of the apex court recently deprecated the practice of resorting to ordinances lightly. The chairperson’s office apart, there is already one vacant office of full-time member and another will become empty this year, resulting in a complete change of guard this year. The key for this new team would be to shed the baggage of legacy if it becomes a hurdle to imaginative thinking while not trying to reinvent the wheel in the name of bringing a fresh mind to bear.

Second, in the market for lending and borrowing of funds, this will be the first year when the new bankruptcy law runs its full course. A regulator for bankruptcy professionals has been set up and it has begun work in earnest. The process for a creditor to initiate bankruptcy proceedings, with an intermediate step of attempting to resolve the defaulting borrower, if run well, would change the landscape. The design of the new law is meant to change the approach from one where the tendency of courts is to attempt revival of moribund business ideas with a large heart, to one where insolvency is not shied away from. Living in a dying state for decades has been the way of life in this space, and if administered well, this area of law and policy will be a game changer.

Much will depend on how effectively the Debt Recovery Tribunal and the National Company Law Tribunal function and operate this law. Business process re-engineering of these tribunals holds the key. If process reform does not take place, we would have thrown yet another law at the problem without creating an effective environment for a proper solution. If recent administrative decisions are any indication, it may be imprudent to hold one’s breath here. In Mumbai, the Debt Recovery Tribunal has been moved to outside Mumbai while the newly set up National Company Law Tribunal is located in south Mumbai, the old commercial business district.

Third, a blind merger of appellate tribunals is on the cards. One strange idea is the merger of the Securities Appellate Tribunal, which is now an appellate court to hear challenges to orders passed by regulators of capital markets (including commodity derivatives markets), the insurance sector and the pension sector, with the National Company Law Tribunal, a court that hears petitions of a specific nature set out in company law. The composition of these tribunals is different, the skill sets required are differentiated, and their experience and track record are substantially varied. If at all one wants convergence in matters of corporate regulation, one would need to first effect a merger between the capital market regulator and the office of the Registrar of Companies, coupled with a lot of the functioning of the Ministry of Corporate Affairs.

One could, of course, have a long-term goal of having an Upper Tribunal like in the United Kingdom, which, as an administrative tribunal, is not an appellate tribunal but, in fact, a trial court. Here in India, our regulators are the courts of the first instance, playing a quasi-judicial role despite playing a legislative role and an executive one, too, within the same organisation. In the UK, if the regulator cannot convince a party to accept sanctions, the regulator would have to prove its case in the Upper Tribunal and secure an administrative order. In India, our regulators are free to issue “such directions as deemed fit” in “public interest” and the appellate tribunal is only a post-event check and balance.

Finally, this year began with a new Chief Justice of India taking office. How J S Khehar, known for his candour and activist-leadership style, and Prime Minister Narendra Modi handle relations between the executive and the judiciary will set the tone for how the Modi administration performs not only this year but also for the rest of its term. Watch this space.This column was published Without Contempt in the Business Standard edition dated January 5, 2017